Shares in Programmed Maintenance jumped a sharp 13% yesterday after releasing better than expected figures for the March 31 financial year.
Investors had been expecting the worst after the company’s surprise earnings downgrade in February saw a big sell-off. But the company provided a pleasant surprise yesterday by meeting most of the targets in the lowered forecasts. The shares closed at $1.62 at the close yesterday.
A statutory loss of nearly $100 million was reported for the year because of the impairment charged flagged in the February statement, but stripping that out, earnings rose, thanks to half a year’s contribution from Skilled Group which was bought last year.
The Skilled boost helped Programmed ride out the downturn in spending by companies in the mining, oil and gas and marine sectors.
Revenue jumped 54% to $2.209 billion, thanks to that takeover of Skilled.
Programmed, which provides staffing, maintenance and facility management services, reported an after-tax profit of $38.8 million before amortisation and non-trading items for the year to March 31, up from $31.2 million for 2014-15.
The company said (http://www.programmed.com.au/images/PDF/ASX/2016/May/3.%20Programmed%20FY2016%20Results%20Update.pdf) that after amortisation and non-trading items (a big impairment charge), the after-tax loss was $98 million (2014-15 a profit of $25.7 million). The company said its results included six months’ revenue and earnings from Skilled Group, which was acquired in October 2015.
The company said that earnings before interest, tax, amortisation and non-trading items (EBITA) were $65.5 million (FY15: $50.9 million), compared with guidance in the February statement of about $65 million.
Amortisation and non-trading items totalled $136.8 million. These were $9.3 million for the non-cash amortisation of identifiable intangibles; $33.9 million related to the acquisition of Skilled and its integration, restructuring and other expenses; $102.4 million non-cash impairment of the Marine division’s goodwill due to lower demand for marine services following the steep declines in oil and gas prices; $1.7 million related to discontinued operations (Broadsword); $0.5 million representing a share of an associate’s net loss; and a tax credit of $11.0 million related to these items.
Programmed said net debt fell to $239 million at March 31 from $302 million at 16 October 2015 on completion of the Skilled acquisition. This compares with guidance in February 2016 of between $260 million and $290 million.
The company will pay a final dividend of 5 cents a share fully franked. This will bring dividends for the full year to 11.5 cents a share fully franked (2014-15: 18 cents).
And in a sign that the company needs support from small shareholders, Programmed has reactivated its dividend reinvestment plan, with a discount of 2.5%. The company said it is considering the full underwriting of the plan for the FY16 final dividend, subject to commercially acceptable terms.
As announced in the February guidance statement, earnings before interest, tax and amortisation for the 2016-17 year "is projected to be in the range $100 million to $110 million which, with depreciation estimated at $20 million, equates to FY17 EBITDA in the range $120 million to $130 million. This is based on current estimates; excluding non-trading items; subject to actual trading conditions, and assumes no material changes to the macroeconomic environment,” the company said yesterday
In yesterday’s statement, CEO Chris Sutherland said, "This was a transitional year for Programmed as we completed the acquisition of Skilled and incurred one-off costs to integrate the business, while also managing the significant downturn in the oil and gas sector.
"The integration of Skilled is ahead of plan, with cost savings of more than $30 million per annum already delivered. The group and divisional management teams have bonded and are operating successfully, and all businesses have been rebranded under the master Programmed brand. Integration of the core business IT systems will be completed during the next 12 months, with projected one-off integration and restructuring costs of approximately $10 million.
"It will take a number of years for the benefits of our increased size, scale and efficiency to be fully realised as we integrate business systems and seek growth across our expanded network. We have a large, scalable platform that will allow us to continue to invest in technology and lower our unit operating costs for many years to come, creating a more competitive service provider and enabling us to provide more benefits for customers,” Mr Sutherland said.
